Arising of the new group of the seven emerging markets — Russia, China, India, Brazil, Indonesia, Mexico, Turkey seems to be the most notable economic result of the year.
Where the world is looking for the new pillars?
In autumn the IMF issued a report on the global economy in which the analysts have specified a group of new leaders. In terms of GDP calculated on the basis of purchasing-power parity (PPP), the seven largest developing countries have outperformed the “G7”.
The very first reaction to the fact that these countries have been grouped in one context is that it is probably another mind game of political economists. But the fortune of another original combination — BRICS (Brazil, Russia, India, China, South Africa) — that has been initially invented by the Goldman Sachs company for its marketing purposes, demonstrates that sometimes an artificial invention starts living its own life — though not the one foreseen by its creators.
When the world is in the state of ever increasing chaos, it is quite natural that people want to get a more stable support — to fix the old one or to build a new one. The problem of international institutions crisis is a long-ago-discussed one but the attempts of their strengthening, reforming or changing have not been efficient by now. Yet the global system is intuitively searching for some kind of balance, and this search is the source of all the new ideas on the possible fundamentals of such a balance.
What has happened to the BRIC during the 13 years since the moment when this organization was mentioned for the first time? Obviously, besides the addition of another letter and country — South Africa. The association has stopped identifying itself in economic terms and turned into a political community, a prototype neither of the anti-West nor of the West.
Initially its ambitions were rather moderate. Developing countries were not satisfied with the alignment of forces in the international financial and economic institutes which stipulates the domination of the USA and Europe. All attempts to review the quotas were hampered by reluctance to make any significant changes on the part of the privileged countries.
But then the agenda became broader. It was connected with the fact that in 2000s and especially in 2010s the incapability of the leading Western countries — first of all, the US, — to ensure effective solving of global political problems became evident. Moreover, the hegemon’s actions worsened the situation. At the same time, rather aggressive administration of George Bush and its antipode — Barack Obama’s team which initially was aimed at a moderate and non-intervention course — achieved a similarly deplorable result. In other words, it started seeming that the flaws of the American leadership are not of conjuncture nature but of a systemic one.
Against this background — wars, interventions, revolutions and economic instability — the BRICS has gained a new purpose: an intention to get some kind of insurance, to prevent shock. It turns out that the main trait uniting this group of countries is holding absolute sovereignty. It requires a combination of two factors.
Firstly, the ability to conduct an independent policy, that is, the absence of compulsory membership in any alliances or groupings which limits the freedom of action.
Secondly, the availability of sufficient economic capacity and weight to ensure that policy.
There are only a few countries in the world that meet these two criteria. Besides BRICS that is, perhaps, only the United States. Europe does not belong to such a category: on the one hand, the restriction due to Euro-Atlantic solidarity (following the fairway of the United States) on the other — the voluntary delegation of part of sovereignty to the European Union.
Underlined sovereignty — that is a real BRICS foundation, which can be the basis for the next “floors” — economic, geopolitical, ideological ones. Building is a long process, but in 2014 it showed a noticeable boost. Finally an agreement regarding the Development Bank was found — a move for now fairly modest (the amount of capital is 100 billion dollars that is not very large in the scale of economies of the member states), but indicating the transition to a new phase of practical institutionalization.
It is understandable why the process has quickened. The conflict between Moscow and the West over Ukraine showed how the Western world can consolidate and punish those out of favor, even if it is such a significant and integrated into the global system power like Russia. And it completed the story of the G8. After Russia’s leaving the group turns into a club of developed Western countries. It is significant, but one cannot speak here about any global governance functions — times when the developing world was ready to accept instructions from the developed world have passed.
Russia ceases to seek recognition as part of the Western establishment which was its purpose for over 20 years, and goes into the category of frank non-West. In the situation of the global shift of economic and political weight to the East this pass is natural and promising. Moving in this direction would be reasonable even without the Ukrainian conflict. But now new opportunities arise for «other» institutions formation, those that do not provide for Western countries participation.
Among regional structures the closest attention should be paid to Shanghai Cooperation Organization. India and Pakistan, and Mongolia are expected to enter it next year, and then the SCO with the big advantage will become the most influential structure in Eurasia. And considering the central position of this part of the world in global politics of upcoming decades, the organization acquires a truly global significance.
And what about the new «group of seven»? How long will last its benefit in GDP numbers — it is a difficult question. Emerging powers are quite vulnerable to crises, and it is clear that China now makes the lion’s share in this preponderance. However, if you look at the list of countries from a political point of view, it turns out that, in fact, figurants of the list besides BRICS are candidates to enter it too.
Indonesia — a country with large population, a very fast growing one, especially now with the new «fancy» president Widodo — clearly has the ability to develop itself to the level of «full sovereignty». Actually, with the absence of external liabilities Jakarta already fully meets the required criteria, the only need is to improve the economy.
Mexico, now experiencing a period of growth, is quite ambitious and is in a similar situation.
It is more difficult with Turkey; the situation there is just opposite. Ankara is economically able to provide an independent foreign policy, but it is a NATO member, that is, it has an obligation to obey the bloc discipline. However, Erdogan course is quite far from the NATO member country’s traditionally imagined line, but formal restrictions have not been canceled.
Tectonic shifts in world politics began long ago — with the end of the Cold War. For a while it seemed that instead of the bipolar confrontation, which guaranteed a fairly high degree of stability of the international system, had come «pyramidal» model under the guidance of the United States. At the beginning of the XXI century it became clear that no firm order appeared. Unipolarity — temporary transition state and polycentrism that comes to replace it has no frame yet and it is unclear what kind of balance may appear.
There started an active search of configurations, which could be relied on. Because of the emerging of new centers of power and influence, the main question lies in the ability to structure this complex environment, optimize the divergence of interests not by reducing the number of players but by their association on one or another basis. In this sense, G7 is a logical community of countries with roughly the same ideological approaches and development guidelines. But there must be other «clubs», also relying on some commonality. And then it is possible to look for ways of these organizations interaction — from balancing each other to cooperation.
For Russia, this development is of particular importance. Moscow must overcome orientation to the West that is inherent to its policy. And it’s not that relations changed sharply due to Ukraine, and Russia became the object of sanctions. This is the catalyst but not the cause. Reorientation to non-Western world has been long overdue — in process of changes in the global arena, the democratization of international relations and emergence of new active players. BRICS and any other associations that arise in its development are almost ideal format not just for the new Russian foreign policy, but also for the new Russian world view. Not against the West but bypassing it, abandoning rooted in our history stereotype that all the main things always happen there.
Russian View represents a portrait gallery of the new G7
Russian President Vladimir Putin tops the list of most influential people in the world according to the Forbes magazine second year in a row. Following Putin in the 2014 list are the US President Barack Obama, the leader Xi Jinping, Pope Francis and German Chancellor Angela Merkel. Magazine ratings, of course, are not the ultimate truth, but they quite logically represent the global political situation in 2014.
For the first time Vladimir Putin took the top line in the Forbes ranking in 2013. He surpassed the US President Barack Obama, who confidently held the top position for several years.
In 2013, the influence of the Russian president, as stated in the explanatory Forbes note, increased thanks to his successful “chess game” around Syria and the story with Edward Snowden. Obama, by contrast, lost some of his rating because of failures in the “Syrian game” and the revealed scandal over the secret services wiretapping. But the reasoning of undeniable Putin’s merits was nevertheless perceived by many in the United States as a direct or even a deliberate contraposition to the actions of Barack Obama, who started a protracted conflict with the Congress.
You can argue about it for a long time. But the fact remains that the situation in 2013 turned out to be prophetic: in 2014 the ways of the two presidents almost did not overlap, and, as the magazine notes, the selection of the most powerful man of the world was “just obvious.” Annexation of the Crimea, historical gas deal with China... In addition, last year the Russian leader managed to strengthen his position in the country and abroad. This is confirmed by numerous — and various — sources.
According to a survey of the Russian Levada Center held on October 24 – 27, 56% of all the eligible voters would prefer Vladimir Putin in the presidential elections (and 87% of those who have already decided on their personal preferences). According to an enquiry conducted by the “Public Opinion” Fund of October 26, Vladimir Putin’s rating is “at a consistently high level.” At the elections he would have support of about 71% of the country’s citizens. 94% of the population have positive attitude to Putin. According to the observations of the VCIOM respondents, today the President does more for the country (59%), receives more sympathy (54%) and trust (50%). 67% of respondents say that Putin began to have more weight in world politics.
Vladimir Putin secured the task to “raise” Russia in the Doing Business World Bank’s rating to the 50th position in 2015 and 20th — in 2018 even in the presidential decree “On the long-term national economic policy.” And everything seems to be going according to the plan.
In the World Bank report published in early November Russia is at the 62nd line. Last year it was at the 92nd. Such an obvious leap is not a random episode: despite the cooling of relations with the West, Moscow has also risen in Bloomberg agency rating and The Global Competitiveness Index 2014 – 2015.
“Investors definitely look on the Doing Business results, especially those that characterize the safety of capital investments in the economy,” — said the chief researcher of the Institute of Economics, Russian Academy of Sciences Boris Heifetz.
By the way, in Doing Business Russia looks better than its BRICS partners. And, according to the Ministry of Economic Development, based on the results of the pilot testing of the National Rating of investment climate conditions a number of the Russian Federation subjects are far ahead of Brazil, China and India.
In another form of the multiathlon — the GDP volume, calculated on the basis of PPP, the picture is somewhat different. China’s economy — the main strategic partner of Russia — this year will be $17.63 trillion in 2015 — $19.23 trillion. Russia’s GDP (in PPP terms) is expected to be at $3.56 trillion in 2014 and $3.64 trillion in 2015. At the same time, the Russian economy is at the fifth place in the world in terms of PPP (2013). And by nominal GDP volume Russia in 2013 occupies the 8th place.
The world becomes more diverse. There appear more global leadership reference points. For example, the Doing Business top 10 rating includes Singapore, New Zealand, Hong Kong (China), Denmark, South Korea, Norway, USA, UK, Finland and Australia. The new G7 (Russia, China, India, Brazil, Indonesia, Mexico, Turkey), as, indeed, the traditional G7 almost are not represented there. But the new G7 is in the top 20 economics by nominal GDP volume — according to the UN, the World Bank and the IMF. And in terms of aggregate GDP calculated by purchasing power parity (PPP), it overtakes the “old” G7 with a score of $37.8 billion against $34.5 trillion. By the same index, China in April surpassed the US and Indonesia — the UK.
What place in this complex global architecture gains Russia?
If you list all the leading positions that Russia occupies in different world rankings, there would be neither enough space in this article, nor patience of even the most interested readers. Let’s name just a part of the achievements.
The country has the largest energy system in the world, takes the first place on explored (proven) natural gas reserves, production and export of natural gas, explored (proven) reserves of coal and lignite, extraction of oil reserves of shale oil, iron ore, silver, production of palladium, export of iron and steel semi-finished products, production and export of nickel. Russia is the second largest producer of titanium mill products, explored deposits of gold, and again the first — of deposits of diamonds and on the weight of extracted stones... And besides, Russia is the first on arsenal of nuclear weapons, the second — on the total power of the armed forces and arms export.
In the UN Index of human development Russia is among the countries with the high level of potential. From the point of view of quantitative indices, figuratively speaking the Russian Federation equals two France: 17.5% of its able-bodied population have the higher education, in France — only 9%.
But, as experts say, even within the harmonious interaction of the BRICS group China remains the financial locomotive and Russia — the political one. However, “What is more important?” is an incorrect question. Both factors matter. It is such a partnership that provides guarantees for global leadership.
The center of power
Back in 1998, Yevgeny Primakov, at that time Minister of Foreign Affairs of the Russian Federation and five minutes to the prime minister, proposed the idea of creating a union of the three great powers — Russia, India and China: RIC “triangle of force.” It immediately found a lot of supporters in Moscow, Beijing and New Delhi.
In 2000, Russia signed a declaration on strategic partnership with India, a year later — a treaty of friendship with China. One year later a tripartite mechanism started working: the first meeting of the three countries’ foreign ministers was held, and in 2006 — the unofficial summit of leaders. To this day the format of meetings at the ministerial level remains regular: problems of global, regional and energy security, strengthening of coordination within the “group of twenty” are discussed. Contacts between the business communities are being developed. “Format of RIC — Russia, India and China — established as a platform for reconciliation of consolidated decisions on the most urgent issues of international and regional agenda,” — said the Russian Foreign Minister Sergei Lavrov at a tripartite meeting in New Delhi on November 10, 2013.
But this format has also become a kind of matrix for the BRICS — more broad alliance with participation of RIC, Brazil and South Africa. The BRICS demonstrated its capability at the July summit in Brazil, marking the commitment not only to the advisory component of cooperation, but also specific economic interaction. Participating countries signed an agreement on the establishment of a development bank. The new financial institution should become an alternative to the Bretton Woods financial organizations — the World Bank and the IMF. According to the President of Brazil Dilma Rousseff, creation of the BRICS bank will be an important step in changing the global financial architecture.
Reunion of the RIC is quite possible within the Shanghai Cooperation Organization (SCO), as India (and Pakistan) intends to enter it. If this happens, the population of the countries united in the SCO will reach 40% of the global one. And next year Russia intends to hold the summit of the SCO at the same time and in the same place with the BRICS summit. The integration of these associations is logical and inevitable. But each of them is going to expand.
“And what about the other members of the new G7?” — the reader will ask. What are the relations between Russia and Turkey, Mexico and Indonesia?
First, since 2012 there are discussions about the possible conversion of the BRICS into BRICSIT. Indonesia and Turkey will bring the last two letters in the name. Second, as Prime Minister Recep Erdogan (now President) stated at a meeting with Vladimir Putin in November 2013, Ankara stands for the accession to the SCO.
In other words, we are talking about the appearance of populous “non-Western” club of countries, the synergistic effect of which exceeds the one of the Rambouillet club — as the traditional G7 was originally known. So it is no accident that IMF and FT analysts compiled a list of promising emerging markets, putting these seven countries next to each other.
We also should not forget the bilateral ties between Russia and these countries that are gaining momentum now. You can read about it further.
The sensation was expected. As far back as at the end of April 2014 the ICP (International Comparison Program working under the aegis of the UN Statistical Commission and the World Bank) published the data on purchasing power parity (PPP) which showed that China was about to outperform the USA as the world’s largest economy. The most astonishing thing was that the presented data were for the year 2011! Now the IMF has officially documented this achievement. Back in 2005 the economy of China was less than 50% of the American one, and in 2011 it was already 87%.
This trend is irreversible: according to the IMF’s forecasts, next year the gap in PPP will be over $ 900 billion in favour of China, and by the year 2019 the Chinese GDP will outstrip that of the US by almost $ 5 trillion.
But the year 2014 was much more eventful for China. For the first time the Chinese outgoing direct investments exceeded inward investments, the fact that turns upside down all that we knew about global capital market. According to the Ministry of Commerce of the PRC, China is already a capital exporting country and it is now poised to become a net exporter of capital.
China is already here
All over the world, from Africa and Latin America to the USA and Europe, Chinese investors buy up real estate, companies and other assets. For instance, a Chinese insurance company has recently purchased Waldorf Astoria Hotel in Manhattan for almost $2 billion. Chinese state company Bright Food Group that bought out UK’s Weetabix 2 years ago has purchased a majority stake in Italian olive oil maker Salov Group. During the last 10 years there was a rapid growth of foreign investments into PRC: from $2.7 billion in 2002 to $108 billion in 2013! And this is only the beginning. Moreover, the companies that previously had to consult a number of ministries and government agencies before they could invest abroad now may comply with more relaxed requirements.
At the same time, according to the experts, the quality of goods and services provided by China has increased significantly. The same goes for the payroll rate, and that is already forcing the Chinese to seek new sources of cheaper labour force, for instance, in the African continent.
China expands not only into the certain world regions (Africa, Latin America), but into the world markets. For instance, it has come forward in the global meat market not by increasing the export potential, but by taking over companies in other countries. At the end of 2012 Chinese company Shuanghui acquired the American Smithfield which resulted in taking possession of 25% of the domestic meat production in the US. In 2012 two Chinese companies entered the list of the world’s top 10 meat producers, Shuanghui-Smithfield and Yurun Foods.
China shows interest in the fertile land of Africa, Latin America, Central, Southeast Asia and Russia and by taking advantage of the competitor’s unawareness manages to make highly profitable deals. In Ethiopia and Sudan, for instance, the government leased vast lands to the Chinese for $1 per acre.
As a matter of fact, this is the strategy of the global Chinese expansion: China enhances outward investments into cheaper assets until there is a burst of activity in the US, EU, Asia or in Russia. You have not yet had time to take a closer look at a new market and create your business plan, but China is already there. To put it more exactly, China is already everywhere.
2014 is a tipping point in the relationship of our countries. Moscow and Beijing have set an objective to increase their bilateral trade volume to $100 billion by 2015 and to $200 billion by 2020 (in 2013 it was $89.21 billion).
For the fourth year in a row China ranks first in the list of Russia’s foreign trade partners. In the first half of 2014 the bilateral trade reached $44.54 billion.
So far the US, Japan, Hong Kong, Korea, Germany, Australia and Malaysia are ahead of Russia in terms of the bilateral trade volume with China. What are our countries planning to do in order to accomplish the ambitious goals they have set? The answer of Li Hui, the Extraordinary and Plenipotentiary Ambassador of China to Russia, is clear and structured. We must improve the investment climate, strengthen the cooperation in all areas and constantly create new points of growth. The first thing we need to do in order to achieve that is to continue cooperation in the financial field, which includes an increase in the volume of direct payments in national currencies for trading and investment activities. We must recall that the yuan/ruble currency pair trade was launched in the Shanghai Stock Exchange and MICEX in 2010. In 2013 the ruble/yuan currency payments amounted only to 6.8% of the turnover. But as Alexei Moiseev, the Deputy Finance Minister, stated in September 2014, Russia and China can transfer up to the half of their turnover into yuans and rubles. However, it will happen only if Beijing lifts restrictions on foreign exchange operations for Russian counterparts. Moiseev said that during the negotiations in Beijing the parties discussed possible exemptions.
The second task, according to Mr. Li Hui, is that we must ensure trade balance, promote mutual investment, including investment in the development of transport infrastructure, the development of mineral deposits, the construction of affordable housing in Russia. Third, we should strengthen our partnership in the area of energy. Fourth, we must develop cooperation in high-tech sectors, particularly in such fields as the nuclear energy for peaceful purposes, civil aeronautical engineering, space exploration.
Fifth, we should implement projects of co-production in the fields of pharmaceutics, medical equipment, chemical and wood processing industry, shipbuilding, transport engineering, non-ferrous metallurgy. Sixth, we must improve conditions for agricultural trade and investments into the agricultural industry. Finally, we must speed up the work for the development of cross-border transport infrastructure, including the construction of the river crossings Tongjiang-Nizhneleninskoye and Heihe-Blagoveshchensk, improve conditions for the transit of Chinese goods through the Russian rail network, the ports of the Far East and the Northern Sea Route. China is also interested in participating in the modernization of the Central Ring Road, in the construction of high-speed railways ... In short, China is already present «everywhere» in Russia.
Nevertheless, this cooperation is mutually beneficial. In 2013 China imported from Russia 24.35 million tons of crude oil, 27.28 million tons of coal, 3.5 billion kilowatt-hours of electricity.
In May 2014 China and Russia signed agreements on a number of major projects, including the one between China National Petroleum Corporation (CNPC) and JSC Gazprom, under which Russia will supply natural gas to China via the eastern route for 30 years. JSC NOVATEK and CNPC concluded an agreement to supply 3 million tons of liquefied natural gas per year.
Moscow and Beijing are discussing the issue of creation of an exchange house for precious and semi-precious stones trade, the President of the group of companies «Karat» Konstantin Bunin said. Beijing exchanges proposed to «Karat» to create a trading platform for precious stones similar to the Shanghai Diamond Exchange. «The idea was so attractive that we immediately got the support of the Ministry of Natural Resources of Russia, the governments of Yakutia and Ingushetia», — Bunin said.
China is one of the world acknowledged leaders in the development of special economic zones, and now it is going to invest into similar projects in the Russian Federation. There are 28 special zones in Russia, but there are no Chinese companies among their residents. Perhaps this is the only white spot on the world map — there are no Chinese yet.
The economic growth in India has never reached such heights as in China. Usually it is 5 – 6% per year. And «usually» is the key word here: the fact is that these indicators remained stable for several decades, which has led to an impressive size of its economy.
In recent years India, like China, has started a broad economic expansion in Africa, Southeast Asia and other regions of the world. Like China, India has become a nuclear power and began to explore the space. This summer it shocked the world with two stunning spaceflight records. The spacecraft Mangalyaan was placed into Mars orbit, and India became the first country able to do it at the first try. The US, Europe and Russia had previously sent their spacecrafts to the Red Planet. But, and this is the second record, the Indian mission was the cheapest one. «We made history,» said Prime Minister Narendra Modi.
The development of the Indian space program was started by a few enthusiasts in an abandoned temple near the launch pad. Now India spends on space $1.2 billion a year. The story is quite typical for this rising economy.
«The Power of Siberia» and the resources of India
Russia and India are studying the technical feasibility of extending the pipeline «The Power of Siberia» to India, told Narendra Taneja, the Co-Chairman Hydrocarbons Committee of the Federation of Indian Chambers of Commerce and Industry. This project is carried out under the contract for the supply of the Russian gas to China. From the very beginning India was asking to extend the pipeline to its border. Now, according to Mr. Taneja, there is enough «political will» for it, the negotiations are held «at the highest level». The experts estimate that by 2020 the gas demand of the Indian economy will increase to 64 – 70 billion cubic meters per year and the country will be forced to buy about 70% of this amount.
The situation with oil is similar. According to Narendra Verma, the Managing Director of the ONGC Videsh, this Indian company is interested in the development of the Vankor field by Rosneft.
India goes to Russia, more exactly to Eurasia. It was decided to establish a Joint Working Group for the purpose of studying the advisability of the agreement between the Customs Union Member Countries and India. In October 2014 the Foreign Ministers of the two countries offered to support India’s bid for full membership (it currently has an observer status) of the Shanghai Cooperation Organization (SCO).
If India succeeds, the SCO will get a decent economic giant among its members: the country is ranked 4th in the world by GDP (PPP), 11th by the amount of gold reserve ($295 billion as of December 31, 2013; $303.7 billion as of March 28, 2014) and 2nd by labour force.
According to the Central Statistical Organization (CSO) of India, in the 2nd quarter of 2014 its GDP increased by 5.7% in comparison with the same period of 2013. This is the most significant growth in two years. According to the Financial Times, few analysts believe that India will be able to return to the growth rates of 8% and above which were seen three years ago. But Morgan Stanley experts think that in the next fiscal year (ending March 31, 2016) the GDP of the country will increase by almost 7%. Actually, this is the threshold that will allow experts to name India among the world’s leading economic powers.
The measures taken by the government in order to stimulate the economy include the facilitation of access of foreign investment to the defence, insurance and telecommunications sectors; the reduction of state subsidies for energy and fertilizers; the creation of a favourable business climate in the special economic zones and national investment and manufacturing zones.
According to the national statistics, in the 2013/14 financial year a positive trend was observed in all three main sectors of the Indian economy: industrial production (27.9% of the GDP), agriculture (14.4%) and service sector (57.7%). The key sectors of industry (coal, oil and natural gas extraction, electricity generation, petroleum, steel, cement and fertilizer production) increased by 3%. Last year India had a record grain harvest of 264.4 million tons. According to the Department of Industrial Policy and Promotion of the Ministry of Commerce and Industry of India, in March 2014 the foreign direct investments amounted to $24.299 billion (8.3% more than for the previous financial year). The major investors in India are Mauritius, Singapore and the United Kingdom.
What about Russia? Let’s look at the weighty opinions of Pundi Srinivasan Raghavan and Alexander Kadakin, the Ambassadors of India to Russia and Russia to India.
The Ambassador of India to the Russian Federation: The state leaders consider the relationship between our countries «a special and privileged strategic partnership». There are close political consultations on regional and international subjects and security cooperation. The military and technical cooperation that the countries were developing for at least forty years now goes beyond the buyer-seller relationship into joint research, development and production. We have broad cooperation in the areas of nuclear energy, space, and in the oil and gas sector. We see good prospects for the increase of the investment flows in both directions into such sectors as infrastructure, oil and gas, energy, pharmaceutics, communications, IT-technologies. In 2013 the volume of trade decreased slightly, to $10 billion. But we already see signs of growth in 2014.
The Ambassador of Russia to India: We have the most successful cooperation in the field of peaceful nuclear energy. The first block of the nuclear power plant Kudankulam in the south of India is already completed, the second block is on its way and by the end of the year it will provide industrial power supply. As for military and technical and space cooperation, I can say that in all those areas we have established a partnership with India.
At the G20 Trade Ministers meeting in Sydney Alexey Ulyukaev, the Minister of Economic Development, also brought current problems to the attention of his Indian counterpart. Despite the statements about privileged strategic partnership, the level of economic cooperation does not meet its potential. According to the Minister, the maximum bilateral trade turnover rate, $11 billion, was achieved in 2012. In 2013 the volume of trade declined slightly due to the reduction in purchases of the Russian products. «The problems are not that numerous, but we should not ignore their negative impact», said the Minister.
Here is how the situation looks like in numbers. According to the Federal Customs Service of Russia, in 2013 the Russian-Indian volume of trade was $10.071 billion, including Russian export ($6.983 billion) and import ($3.088 million). At year end India ranks 21st in the list of Russia’s trading partners. According to Indian statistics, Russia ranks 31st among its foreign counterparts. In January – March 2014 the main part of the Russian export accounted for machinery, equipment and vehicles, metals, chemical products, rubber, mineral products, fertilizers, wood, pulp and paper products. Russia imports products of the chemical and pharmaceutical industries, rubber, food and agricultural supplies, textiles, footwear, vehicles, metals.
According to the Russian Ministry of Economic Development, India and Russia are planning to launch a joint investment fund that will finance high-tech projects. The reserves of the fund will amount to $1 – 2 billion. In particular they will be destined for the development of the deposits Verkhnekamskoye and Partomchorr and for the production of lighting equipment in India.
There are new opportunities in trade, for instance, in agricultural products trade. The share of these products in the Indian export to Russia reached almost 25%. The supplies can be expanded due to growing export of fruit, vegetables, fish and meat products. In their turn, Russian agricultural technologies will find a use in Indian agriculture.
India has a program called «Make in India». It provides for the elaboration of more attractive conditions in the country for foreign enterprises in the areas of the customs, taxation, transportation, and human resources. It creates opportunities for the joint production of goods that benefit both parties with regard to the production costs and the end product marketing. According to the Indian partners, India could do the same in Russia.
All that was discussed during the investment forum held on the eve of the Russian President Vladimir Putin’s visit to New Delhi in December. However, the Indian Prime Minister Narendra Modi invited the Russian President to visit some other cities besides the capital, for instance Kudankulam, where Russia is involved in a nuclear power plant construction. «We are looking forward to your visit. I have a request for you, please, come for more than just one day this time...»
On October 26, 2014 Brazil made its choice: 66-year-old Dilma Vana Rousseff was reelected as the President of the country. This is the second presidential term of the first female president of Brazil.
Rousseff’s opponents will certainly say that she enjoys widespread support among poorer segments of the population with an income of no more than $700 a month. Her strong point is «equality and fraternity». Being a daughter of a Bulgarian communist who left his homeland in 1929, she inherited a commitment to socialist ideas and defended them firmly, having gone through prison and torture. But those are all empty talks.
During Rousseff’s first term Brazil became the largest and most balanced economy in Latin America and eighth largest economy in the world in terms of GDP (calculated on PPP basis) and gold reserve. It is indicative that for the last five years the country hasn’t experienced any negative dynamics of capital movements. That means that the national business and foreign investors feel very comfortable in Brazil.
«I will take immediate action to accelerate the pace of growth and ensure a high level of employment and wages», Rousseff promised in her victory speech specifying that she would place special emphasis on the production development.
Order and Progress
Ordem e Progresso (for order and progress) is the national motto of Brazil. The order is the basis, the foundation of the state, and the progress is its main goal. In recent years the progress has often been on the verge of the record.
For instance, in 2007 first significant deposits of hydrocarbons were discovered in the shelf area of Brazil. But in July 2014 the volume of oil and gas production already amounted 2.82 million barrels of oil equivalent per day. Oil production increased by 14.8%, gas production — by 12% in comparison with last year. Experts have started saying that the country had a chance of entering the list of the top five world producers. Foreign investors appreciated that.
In March 2014 Rosneft Brazil, a subsidiary of Rosneft, signed an agreement with the Brazilian company HRT O&G to acquire an additional share (6%) in the project «Solimoes». As a result, Rosneft Brazil will get 51% and the powers of the operator. Rosneft will also acquire four mobile drilling units from HRT O&G.
Here’s another record. In January 2014 the Department of Revenue and Taxation reported a 4.1% increase in revenues (up to $483 billion). The officials say that these figures demonstrate first of all economic well-being. «Even with the tax benefits the revenues continue to grow which indicates an improvement in economic activity», said the representative of the Department.
In terms of territory Brazil is ranked fifth largest country in the world and the first one in Southern Hemisphere. It borders all Latin American countries except Chile and Ecuador which strengthens significantly Brazil’s leadership in the continental trade. The country has substantial reserves of bauxite, gold, iron ore, nickel, phosphates, platinum, rare earth metals, forest and water resources. Moreover, the «discovery» of Brazil as an oil power even caused discussions in the expert community about the deindustrialization of the economy and the return to raw materials exporter and manufactured goods importer status. The supporters of this point of view believe that in the developed countries deindustrialization is compensated by high-quality services in the field of education, science and technology. But as their opponents say, in the case of Brazil the «compensation» can result in return to the agricultural export model.
In the meantime Brazil is increasing industrial production in the automotive and aircraft industries, chemistry and metallurgy, textile and computer industries. Thus, the national company Embraer is one of the world’s largest manufacturers of a wide range of aircrafts. Among other things the country has developed the entertainment and service industries, in particular banking, medical, financial and tourist sectors.
Brazil is a country where economy is dominated by foreign capital. In 2013 about 3/4 of the assets were owned by foreign investors and companies. The tax system that has been stable for decades contributes to that in the first place. The taxes themselves are not very low, but their immutability enables businesses to build a long-term strategy. High index of trading conditions that exceeds the value of the three leading economies of the world, China, the US and Japan, also contributes to the investment inflow.
In the recent years the United States and Argentina were Brazil’s main trade partners. However, the unconditional primacy belongs to China. For instance, soy ranks 4th in the list of Brazilian exported goods, after iron ore, oil and vehicles/spare parts. In the 2000s the prices for agricultural products in the world market grew due to strong demand from China which became Brazil’s main importer. But it’s not only about soy. In 2012 the volume of trade between the two countries amounted to $85.72 billion (for comparison: between Russia and China it was $88 billion).
Brazil and China were among the first countries to challenge the dollar. In 2009 international payments in national currencies were established between the countries. In 2013 they agreed to trade in yuan and pesos for up to $30 billion a year, thus moving almost half of their trade exchange off the dollar zone.
In the first decade of the XXI century the relationship between these two countries entered a new phase in their nearly 200-year history. «Our partnership is strategic in nature», said Putin during his visit to Brazil in July. «This is due to the fact that Brazil is a responsible member of the world community with a steadily growing political weight, as well as the largest country in Latin America and one of the leading economies of the world».
Indeed, it is enough to mention that Brazil participates actively in the BRICS, the «Group of Twenty» and a number of Latin America regional organizations (CELAC, MERCOSUR, UNASUR) in order to understand: Russia supports Brazil as a deserving and strong candidate for a permanent seat on the UN Security Council for a reason. This dynamically growing country is to play an important role in the new emerging world order.
The BRICS countries (including Russia and Brazil) have agreed to settle trade payments in their national currencies rather than in US dollars. According to the WTO, Russia is now ranked 11th in the list of the largest trading partners of Brazil. In its turn, Brazil is Russia’s largest trading partner in Latin America.
For the last ten years the bilateral trade volume has almost tripled (in 2013 it was $5.5 billion). The companies maintain contact through the Russia-Brazil Business Council.
According to the Russian Ministry of Economic Development, in 2013 the main shares of the Russian export were chemical products (80.6%) and mineral products (10.4%). The ratio of metals and their products was 6.1%, that of the machinery, equipment and vehicles — 1.7%. Russia mostly imports from Brazil food products and agricultural raw materials (84.1%). The main products are meat (pork, poultry), tobacco, sugar cane, coffee, ferro alloys, aircraft, nickel matte, internal combustion engines, footwear, bulldozers. Meat purchases amount to 55.9% of the total value of Russian import.
In 2010 the countries mutually abolished visas. Dozens of Russian universities that participate in the Brazilian educational program «Science without Borders» are ready to open their doors to the students from Brazil. Cultural exchanges have become traditional.
According to the Russian President, Russia and Brazil have enormous economic potential. But it hasn’t been fully realized yet. The strategic objective, as understood in Brazil and in Russia, is to move from the «classic» goods exchange to multi-field cooperation in investment and industry spheres. There already are some examples of this cooperation. A series of investment projects involving companies from the two countries were launched in the fields of energy, engineering and pharmaceutics. The Rosneft corporation and the Brazilian company HRT Oil & Gas jointly undertake exploration and production of hydrocarbons in the Solimoes Basin.
In Santa Catarina state the Power Machines company is setting up the production of hydroturbine equipment generating up to 100 MW for its subsequent delivery to the markets of Brazil and other MERCOSUR countries. The Biocad company is creating in Brazil a research, education and production center which will manufacture modern innovative drugs for cancer treatment.
The Plan of Actions for the development of trade and economic cooperation between Russia and Brazil in 2014 – 2015 was adopted. It intends for the mutual deliveries to both increase and be more diversified, and for the share of innovative and high-tech products to grow in the bilateral trade volume.
In the spring of 2014 the world price of nickel soared by 15.2%, and since the beginning of the year by whole 32%! The metal showed the highest values of the S&P GSCI index. Perhaps, only coffee the cost of which has risen by more than 80%, can compete with this highly demanded in the world market product. The reason for that is Indonesia which banned the export of unprocessed nickel ore and bauxite this January in order to force its mining companies to conduct their processing within the country and to increase the earnings from export. According to Chairul Tanjung, the Coordinating Minister for Economics, about $8 billion have been invested in the construction of three alumina processing plants and two ferronickel processing plants in Indonesia.
The country has the full right to run the show in the world market. According to the US Geological Survey, in 2013 Indonesia and the Philippines took a leading position in the production of nickel ore, providing 18% of world supply. Now due to the leap in prices experts call nickel «the gold of 2014». And the introduction of this measure should constitute the basis for a diversification breakthrough. After all, as the new Indonesian President Joko Widodo promised, in two years the economic growth rate will be accelerated to 7% due to infrastructure development and industrial production.
Indonesia with its population about 230 million people is one of the four most populous countries in the world, along with China, India and the United States. PricewaterhouseCoopers analysts predict that in the coming decades it will experience stable economic growth which will make the country one of the top ten leading economic powers of the world.
The basis of the Indonesian economy is mining oil and gas processing in Sumatra, Java, Kalimantan and in the western part of Irian Jaya. The main industrial clusters, Jakarta, Surabaya, Yogyakarta and Palembang, are primarily focused on oil and gas processing, metallurgy, chemical industry. Two thirds of the employed population work in the food and textile industries.
In addition to nickel and oil Indonesia has rich deposits of tin, bauxite, manganese, lead, copper, zinc and chromium.
According to the Bloomberg agency, in the second quarter of the year 2014 the economy of Indonesia grew by 5.1% in annual terms. In the recent months rupee has shown the most significant growth among the 24 currencies of emerging economies. In quarterly terms GDP increased by 2.47%, household consumption by 5.59%, capital investments of the companies by 4.53%.
Indonesia is one of the emerging and fast growing economies (EAGLE countries, Emerging and Growth-Leading Economies), it is ranked 4th after such “eagles” as Brazil, China and India by the contribution to world economic growth. Moreover, Indonesia is a member of the MIST group (Mexico, Indonesia, South Korea, Turkey) which brings together countries with high economic growth potential and favourable investment climate. This new abbreviation was introduced in the economic lexicon by the Goldman Sachs analyst Jim O’Neill, the creator of the term BRIC. For the MIST O’Neill proposes to use the term «growth markets»: the share of each of these countries exceeds 1% of global GDP.
According to the CSO of Indonesia, in 2012 the manufacturing industry growth was 6.1%. The main components that accounted for the growth are fertilizers, chemical products, rubber (by 9.2%), food and tobacco (by 8.2%), vehicles, machinery and equipment (by 6.2%), ferrous metals, steel (by 5.6%). At the same time there was a slowdown in the growth rates of textile, leather and footwear industries because of the fall in demand for their products in foreign markets.
But agriculture has strengthened its position significantly due to the development of the food crops — especially rice — sector, as well as to the expansion of cultivated areas and productivity gain.
High growth rates were recorded in recent years in the transport and communications spheres (10%), trade, hotel and restaurant industry (8.1%), construction (7.5%). A steady growth was recorded in the sector of finance, real estate and business services (7.1%), electricity, water and gas supplies (6.4%), manufacturing (5.7%) and services sector (5.2%).
The country built several ports capable of receiving vessels of over 500 tons: Tanjung Priok (port of Jakarta), Tanjung Perak (port of Surabaya), Belawan (port of Medan). The main oil terminal of the country is the port of Palembang. Petroleum and petroleum products, rice, okrah, cement, flour, fertilizers, coconut oil, rubber, asphalt, wood, lumber are transported by the sea.
International air transportation is limited to Jakarta (Java), Medan (Sumatra), Denpasar (Bali). The airlines connect the main cities of Sumatra to Malaysia, those of Jayapura to Papua New Guinea. Air transportation within the country is limited to the services of several companies, first of all they are Garuda (the national airline) and Merpati Nusantara (partially subsidized by the government).
Russia and Indonesia
At the end of October 2014 during his working visit to Indonesia Denis Manturov, the Russian Minister of Industry and Trade held a meeting with Irman Gusman, the Speaker of the Regional Representative Council of the Republic of Indonesia. According to the Minister, Russia and Indonesia face the task of increasing trade and economic volume from $3 to $5 billion. The bilateral commission on trade, economic and technical cooperation should contribute to that. Its next meeting will take place in Moscow in the first quarter of 2015.
During their meetings the Minister of Trade discussed with the leaders of the Indonesian CCI the possible purchase of the Russian amphibian aircraft Be-200 as well as the organization of the production of components for short-range and mid-range airliner MC-21 in Indonesian territory.
According to Manturov, Russian companies are ready to participate in the development of the Indonesian shelf as well as to supply the civil and military marine facilities to the republic.
According to the Ministry of Economic Development, despite the growth in bilateral trade raw commodities still constitute a significant share of Russian export to Indonesia. In this regard the diversification of the Russian-Indonesian trade relationship towards the scientific, technical and investment cooperation is still one of the highest priorities.
The export of high-tech goods from Russia to Indonesia is constrained by the competition from Indonesia’s traditional large trading partners, China, Japan, South Korea and the ASEAN countries, which are present in almost all sectors of the market. Indonesia has free trade agreements with neighbouring countries, both bilateral ones and those within ASEAN.
The idea of the creation of a common economic space in the ASEAN + 6 form (ASEAN, China, Japan, South Korea, India, Australia, New Zealand) is being discussed in various regional forums. The Economic Development Ministry experts believe that more active participation of Russia in such discussions can have a positive impact on the development of trade and economic relations with ASEAN and especially with Indonesia.
Now the Russian import from Indonesia mainly includes industrial raw materials of tropical and animal origin: fats and oils, tea, coffee, cocoa, organic chemicals, tobacco. Russia also buys clothing and textiles, footwear, furniture, paper and cardboard, perfumes and cosmetics. An increase was noted in the supplies of Indonesian television and radio equipment, communication equipment and its components.
According to the experts, Earth remote sensing, electric power industry, mechanical engineering, environment control, global ocean development, joint peaceful use of outer space and space technologies, shipbuilding could be promising areas for bilateral cooperation.
Russian companies can provide their Indonesian partners with oil and gas and mining equipment, road construction machinery. The experts also believe that the extraction and processing of Russian mineral resources, forest resources and petroleum products, the establishment of consumer goods production in Indonesia, the assembly of road construction machinery, the agricultural processing, the construction of administrative buildings and residential complexes in Russia could also be promising areas for the investment cooperation.
In early October, the largest international organization of InterNations, which unites expats from around the world, held a large-scale study Expat Insider-2014. Based on a survey of 14 000 professionals from 160 countries a list of the best, in their view, countries was compiled. The third place was taken by the United States. Not American, but the Mexican ones — Estados Unidos Mexicanos. Mexico was behind Ecuador and Luxembourg, but ahead of their North American competitors, and prosperous counties like Switzerland, Singapore and the technologically advanced, environmentally-friendly Australia, and the trading giant of Hong Kong. Local quality of life, leisure, entertainment, opportunities for adaptation and financial issues — in short, everything that makes a human being convenient and comfortable, 91% of expats have estimated perfectly. 44% expressed a desire to stay in Mexico forever. By the way, by rating the level of life satisfaction Mexico occupies the fourth place in the world. Isn’t it a key point?
TIMBI, MIKTA, MINT … G7
If you are not tired of acronyms like BRICS or MIST yet, we are ready to continue this philological-geopolitical digression. Especially because Mexico is as popular as hot cakes in leading countries groups.
So, TIMBI means Turkey, India, Mexico, Brazil, Indonesia. These countries are proposed to group the likely leaders of global growth by Jack Goldstone, a professor at George Mason University (USA). The scientist focuses on demographic factors, which, in his opinion, could play a decisive role in the future alignment of world economic potentials. For example, in the years 2003 – 2014 the population of India grew by 18%, Brazil — 13%, Turkey — 8%, Mexico and Indonesia — 15%. As a result, the total number of TIMBI residents exceeds 1.9 billion people, and it’s about 27% of the population. Their GDP of 11.7 trillion, about 16% of the global total is also solidly presented. Experts predict further growth of TIMBI influence in the global economy.
There is quite a fresh invention: MIKTA — Mexico, Indonesia, South Korea, Turkey, and Australia. In mid-April 2014 the foreign ministers of these countries met in Mexico, discussed a wide range of issues of mutual interest, as the diplomats said, and decided to make such meetings regular. The next one will be held in South Korea in the first half of 2015. What do these countries have in common? According to the head of the Center of Iberian Studies (Institute of Latin America, RAS) Peter Yakovlev, it is about creating an informal negotiating structure of “middle powers”, whose management believes that in the current architecture of global governance they are not able to effectively defend their economic and political interests. Let us remind you, that in the ranking members of the IMF in terms of GDP MIKTA takes place from the 10th (Mexico) to 17th (Australia).
MINT means Mexico, Indonesia, Nigeria, Turkey. This letters game was coined by Jim O’Neill, the economist who invented BRIC.
But if in MINT the attention is attracted by the presence of such a novice leadership associations like Nigeria, which has now become the largest economy in Africa, in the already mentioned MIST group (Mexico, Indonesia, South Korea and Turkey) the highlights are on the second largest economy in Latin America — Mexico.
The cause of all these new country classifications is simple: significant changes are undergoing in the structure of the world economy. “Historical” leaders of the global economy from the Old World are being jostled by countries, which were impossible to imagine in this capacity in the mid-90s. Now investors connect with them hoping for a new breakthrough in global economic growth. The appearance — at the expert level so far — of the new G7, where Mexico is a member, is a clear confirmation for that.
Since the mid 90s Mexican GDP grew 4.4 times, export grew almost 5 times, foreign exchange reserves — 11,5 times. The country managed to reduce inflation radically, keep unemployment at the same level, increase the flow of investment, significantly reduce the external debt burden and the costs of being tied too closely to the US market.
The strong point of the Mexican economy, as noted by Professor Yakovlev, lies in its diversified economic structure. It combines the features of the resource of the developing states and countries with large service sector and the emerging industrial powers with modern export-oriented industries. In Mexico, with its strong manufacturing industry, there are many enterprises which meet international standards. In 2013, automobile production of the country reached the 8th place in the world (more than 3 million units), and the production of cars for commercial purposes is on the 6th place (900 thousand). The growth of Mexican exports in this sector over the last four years has increased an average of 11% per year.
Mexico holds a strong position in the markets of electronics and mobile communications. The country has 2095 enterprises engaged in information technologies — this industry is growing by 9% per year. In 2012, the IT industry revenues totaled $1.8 billion. In the same year, Mexico exported electrical and electronic equipment (including personal computers and 82 million cell phones) in the amount of $72 billion.
At the same time the country has a strong mining sector. Gold, molybdenum, silver, manganese, coal, iron ore, copper, lead — Mexico is among the top ten world producers in 17 types of raw materials.
Plus there are agriculture and tourism. Mexico is investing in tourism more than in the defense and health care. This was said in May 2014 by President Enrique Peña Nieto. And he named the amount — about $14 billion. At the opening of the International Tourism Fair in Cancun president outlined three areas for investment of these funds: infrastructure, expansion of supply of tourist destinations and the modernization of airports and roads. Among the priorities are the salvation of beach areas and the development of centers of cultural heritage of the Maya, such as Chichen Itza, Palenque and Teotihuacan. In 2013 the country was visited by 23.7 million people, and in January-February 2014 the number of tourists from abroad has reached 4.5 million. Tourism is the fourth largest source of foreign exchange for the country. Mexico itself is included in the eight most visited countries in the world.
Mexico is an attractive area for investment. It ranks fourth in terms of foreign investment among countries with rapidly growing economies and second in Latin America. Foreign direct investment (FDI) has increased from 12.6 billion dollars in 2012 to 35.2 billion in 2013. Major investors are: Belgium — 37.7%, USA — 32%, the Netherlands — 7.6%, Japan — 4.4%, Germany — 3.6%, United Kingdom — 3.3%, other countries — 11.4%.
Oil and Gas
However, all the industry of the Mexican economy, without any exceptions, does not go to any comparison with the main engine of country’s growth — oil and gas sector.
After 2013, when the Mexican government failed to bring about changes in the constitution and conduct energy reform, Moody’s upgraded the country’s credit rating to A3. Now experts predict a rise in oil production by 20% by 2018. Plus 40 per cent increase in gas production, 50 billion of investment and an additional point to GDP growth. By 2025, oil production is expected to grow to 3,5 – 4 million barrels per day, that is, almost twice. The total reserves of the Mexican shelf are estimated at 27 billion barrels and 13 trillion cubic meters of gas.
US and British corporations Exxon Mobil, Chevron, Shell, BP, working in the neighborhood, in the US Gulf of Mexico, as well as partners from Spain and Russia show interest in Mexican hydrocarbons.
Freedom of trade
The membership of Mexico in the North American Free Trade Agreement (NAFTA) with the United States and Canada promotes its economic development. The interaction with other neighboring countries has also intensified recently.
In February 2014 the Pacific Alliance countries — Mexico, Colombia, Chile and Peru — have created the Customs Union. “We intend to make the region more productive and competitive,” — said the president of Mexico, Enrique Peña Nieto. According to the WTO, these countries are exporting goods to a total of almost half a trillion dollars.
The Mexican government admits the possibility of creating a transport corridor linking the Pacific and Atlantic oceans. “The corridor runs from the port of Salina Cruz in Oaxaca to the port of Coatzacoalcos in Veracruz, it will link the two oceans on the existing railway, which will be upgraded and expanded,” — said the governor of the Mexican state of Oaxaca Gabino Monteagudo.
According to experts, no other country in the world is so open to international trade. This has enabled Mexico to become the world’s largest exporter of plasma TVs, smartphones Blackberry and refrigerators.
Russia and Mexico
According to the Federal Customs Service of Russia, trade with Mexico in 2013 amounted $1.903 billion. Including export was $855,4 million (an increase of 1.7 times), import — $1047,6 million (4.2% decrease). In the structure of Russian exports the main portion is of supplies of metals and their products — 50.5%, chemical products — 22.8% and mineral products — 18.9%. The share of exports of food and agricultural products is 5.2%, wood, pulp and paper products — 1.7%. Structure of imports from Mexico is formed by machines, equipment and vehicles (72.2%).
The most promising area of Russian-Mexican cooperation is energy. With the participation of the Russian company OJSC “Power Machines” two hydroelectric power plants in the Mexican state of Nayarit were constructed, and together with the Mexican company ICA a hydropower plant “La Yesca” in Jalisco was built.
In August 2013 it was reported that JSC Gazprom is interested in infrastructure projects in Mexico, particularly in participation in the modernization of the national gas transmission system of the Mexican company Pemex. Let us recall that in late 2013 the President of Mexico conducted an energy reform that allows foreign companies to support the country’s energy sector and state-owned Pemex. Before that, for 75 years the oil and gas industry has been the monopoly of the local government.
Gazprom became interested in the Mexican market back in the mid-2000s, when the company had talks on deliveries of Russian LNG. Then the development of local energy infrastructure was discussed. To this end, in 2012 Gazprom registered their trademarks in Mexico. And in 2014, the concern was among the bidders for the construction of a gas pipeline connecting Mexico and Guatemala — such a statement was made by the Ministry of Economy of Mexico.
As reported in September this year, the Bloomberg agency, Gazprom and Lukoil are showing interest in the electric power industry in Mexico. In January 2014, LUKoil signed a cooperation agreement with the Mexican state company Pemex. The Company expects to enter into offshore projects in the Gulf of Mexico.
In turn, Mexico has good prospects for increasing exports of vegetables, fruits and vehicles to Russia, said the president of the Mexico-Russia committee at Mexico Business Council Jose Carral. “It interests us more and more, as well as the supply of electronics. Mexico has made great efforts for the production of radio, so for us it is interesting that Russia opens its doors. They were always open, but there are more opportunities now,” — said Carral. Earlier, Mexican Ambassador to the Russian Federation Ruben Beltran said that the country is ready to increase supplies in the Russian meat products, if necessary.
Mexican companies expand their presence in the Russian market. “Groom”, the largest world producer of corn flour cakes, has its own company in Moscow and is building a factory in the Moscow region. “Omnilife”, producer and international distributor of food products, has an office in Moscow. The company of “Nemakit” signed an investment agreement on the construction of a plant for the production of automotive components with Ulyanovsk region.
A significant event was the signing of a contract for the supply of a Mexican company “Interjet” with 20 aircrafts “Sukhoi Superjet-100”, which began operating in 2013. There are “Mi” of various modifications, vehicles with high cross called “Ural”, and man-portable air defense systems “Igla” in service of the Ministry of the Navy helicopters.
According to Mexican politicians, “our countries have limitless potential for growth.” As for the president of Mexico, Enrique Peña Nieto, he is full of enthusiasm for the Russian-Mexican relations. The practice confirms it.
There is a remarkable fact. Turkey’s first nuclear power plant in Mersin province in the spring of 2015 will be built by «Atomstroyexport», a subsidiary of Rosatom. The intergovernmental agreement was signed back in 2010. Four reactors will give 35 billion kWh of electricity per year; full capacity will be reached in 2023, on the 100th anniversary of the Turkish Republic. And there is the second nuclear power plant in the province of Sinop, that Japanese will build in Turkey by agreement of 2013. The project at 40 billion kWh of electricity to be completed just for the same memorable date. And here is the latest news. As Prime Minister, Ahmet Davutoglu, says, in 2018 – 2019 years Turkey will build a third plant. And they will realize it themselves as a national project.
In Turkey people got used to the fact that Europe and Asia are connected by the Bosphorus Bridge in Istanbul. Perhaps, this is why this country has never adjoined to any of these shores. Its path to Europe was delayed by nearly half a century, and it seems that no one is going to force the issue. Ankara also holds a selective position for Asian partners. However, Turkey has a special relationship with Russia. Probably because both of the countries are Eurasian.
As for the nuclear power plants — it is a strong need of the growing Turkish economy. According to the Minister of Finance Mehmet Simsek, reforms are necessary to accelerate the economy further. In the nearest future everything about these projects will be announced by the head of the government.
Turkey is one of the founders of the Council of Europe (1949), since 1963 it is an associate member of the European Union. Formally, Ankara has applied for membership in the Union only in 1987. 12 years later it received the status of a candidate. Periodically the topic of EU membership sounds from high rostrums, but the positions of the supporters of European integration and of the eurosceptics (both in Europe and in Turkey itself) still balance each other.
Meanwhile, Turkey has become a dialogue partner of the Shanghai Cooperation Organization (SCO) and it also builds cooperation with “the other shore.” Its main product markets in 2013 were Germany, Russia (ranked second with a turnover of $32 billion), China, Italy, USA, UK, Iran, France, Iraq, and Spain. Simultaneously, the government sets the task to expand trade relations with the countries of Asia, Africa and Latin America.
In terms of economy, Turkey ranks sixth in Europe and 16th in the world. According to the State Institute of Statistics of the country, in 2013, GDP growth in nominal terms was 10.2%; 4% — in real terms (1998 being the base year). GDP (current prices) in 2013 were $820 billion against $786.2 billion in 2012. GDP structure of Turkey is: services — 66.5%, industry — 24.7%, and agriculture — 9.2%.
In April 2012 a new system of preferences for the investors was introduced. Turkey remains one of the main recipients of foreign direct investment in the region. The country came to the group of most dynamic economies in the world. In 2013, Fitch Ratings has upgraded Turkey’s investment rating from BB + to BBB-, which gives it the status of the “favorable for investment” country. The index of industrial production in 2013 amounted to 116.3 (in 2012 — 112.9). Agricultural production increased in 2013 by 3.2%.
And tourism, of course. In total, according to the Ministry of Tourism of TR, the number of foreign visitors during the first nine months of 2014 amounted to 30.09 million, which is 6 percent more than last year. According to the Institute of Statistics (TÜİK), guests of the country “left” in Turkey almost $19 billion in 2013.
Russia and Turkey
Trade and economic cooperation between the two countries has traditionally been focused on energetic and power-producing field. Russia remains the main supplier of gas to Turkey, in accordance with long-term contracts it exports oil by the Trans-Balkan and the “Blue Stream” pipelines. The volume of purchases in 2013 amounted to 26.6 billion cubic meters. Russia occupies the 4th place among the major Turkish exporters of crude oil.
According to Rosstat, in 2013 the volume of accumulated direct Turkish investment in Russia totaled $495.9 million; Russian direct investments were $1.7 billion.
In 2013, the project was launched, involving the supply of gas turbine equipment of JSC “United Engine Corporation” to the branches of the Turkish company “Botas”.
Following negotiations between the JSC “Power Machines” and governance of water works, Turkey signed a contract for the construction of 3 hydroelectric units “Kygy.” The scope of work involves the construction of the machine room power plant turnkey.
In April 2013, “Inter RAO UES” has closed the acquisition of the assets of the company “TRAKYA ELEKTRİK ÜRETİM VE TİC”, consolidating 100% of the company. TPS “TRAKYA”(capacity 478 MW), is located 100 km from Istanbul on the Marmara Sea shore.
A plant for the production of flat rolled products operates in Iskenderun. It was built jointly by the Magnitogorsk Metallurgical Combine, and the Turkish company Atakas. Alfa Group and Cukurova holding signed a contract for the purchase of shares of the largest Turkish mobile operator Turkcell for $3.3 billion Russia’s Sberbank bought Turkish DenizBank ranked sixth in the top-ten largest banks in Turkey (transaction amount — $3.5 billion).
In 2013 a joint project of assembling production cars “Gazel Business” between Russian holding “GAS” and Turkish Mersa Otomotiv was launched.
The main areas of Turkish investments in Russia are still the textile, food, chemical, woodworking, electronics and electrotechnical industry, production of building materials, automobiles and automotive components manufacturing, services, trade, tourism and banking sector. Investment in special economic zones in Russia, especially in Tatarstan is also ongoing.
Examples of successful work of Russian and Turkish companies are the following: Shoe Factory “Brice-Bosporus” in Novorossiysk, JV “Rockland” in Serpukhov (products are sold under the trademark “Tervolina”), a textile factory of JSC “Gloria Jeans” in the Rostov region. The presence of Turkish companies exists in the Russian market of contracting services in the building sector.
Inter-regional cooperation between the subjects of the Russian Federation and Turkish provinces is developing. Traditional partners of the Turks are Moscow, Moscow region, St. Petersburg, Tatarstan, Bashkortostan, Krasnodar and Stavropol, Rostov, Vladimir and Penza region.
Turkey continues to be a major supplier of fresh fruits and vegetables to the Russian market.
In January 2013 the East Mediterranean International Tourism and Travel Exhibition was hosted in Istanbul, where touristic presentation of Tatarstan and Krasnodar were performed. In March 2013, the Turkish delegation, which included representatives of several ministries, municipalities, the business community and the Chamber of Ankara, Afyon, Konya and Adana, visited the Chechen Republic.
Turkey consistently keeps the bar of the most Russian-visited resort. Russian tourists traditionally divide first and second places with the Germans.
According to forecasts, in the next few years, the number of foreign tourists in Turkey will increase to 40 – 50 million per year. However, for such an influx it would be necessary to prepare not only the country’s tourism industry, but also all of its growing economy.